Revised Industrial Policy Action Plan: Committee report deliberations

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Trade, Industry and Competition

26 May 2010
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

The Committee met to consider another draft of the Committee’s Report on the Revised Industrial Policy Action Plan (IPAP) following the public hearings earlier. The Committee went through sections of the Report, highlighting whether additions suggested by Members should be included, and whether other issues were properly placed, and needed to be altered to more appropriate wording. Members agreed that the fact that Eskom had not made a submission in relation to IPAP, despite several requests, should be highlighted in the Report, and discussed whether it would be appropriate for any recommendations that it might make subsequently to be included as an annexure. The Chairperson stressed that the Report should be accessible to all, which meant that certain key definitions and explanations must be included.

Members suggested the inclusion of comments on inequities, suggested changes to the wording that would suggest the necessity to find a balance between producing for the export market and providing manufactured goods for the domestic market, and noted that the time was right to emphasise the value-added effect, although Members cautioned that the correct wording should be found in order to ensure that successful industries who did not produce value-added products were not excluded. Members also said that it was necessary to note that sufficient funds were needed to support the IPAP2 within budgetary constraints, that the concept of training and skills must be included, and the importance of private sector investment, support for infant and new industries should be emphasised.

Members agreed that certain inclusions suggested by an IFP Member did not reflect the values of IPAP and could be contradictory, and that references to the World Trade Organisation and International Monetary Fund should not be included. Comparisons between the labour intensity of automotive assemblers and manufacturers would not be included, nor would additional suggested paragraphs on carbon emissions. The Committee discussed whether the Report should explicitly state that maize would be excluded as a bio-fuel crop, and agreed on revised wording, as also the need to discuss this further once the Department of Trade and Industry study on the viability of other crops for bio-fuel was available. The Committee’s opinion on the Arcelor-Mittal Kumba Iron Ore contestations would be included, but some of the additional comments by the Committee, although interesting, had not been supported by submissions during the public hearings and were not in IPAP, and thus would not be included. The Report would reflect that further feedback from the Department of Trade and Industry, including reports on the role of local government, were still required. Overall, the Report would reflect that there was much common ground in the submissions, and would state the areas of convergence and the general principles behind the IPAP. The final draft would be considered for adoption on 1 June 2010, and would be debated in Parliament on 18 July.

Meeting report

Revised Industrial Action Plan: Committee Report: Continuation of deliberations
The Chairperson remarked that she was pleased to see so many Members present to participate in the discussions on the Committee’s Report on the Revised Industrial Policy Action Plan (IPAP2). She noted that the debate originally scheduled for 1 June had been postponed, as the Union Day Debate would take preference, and would now take place on 18 July.

The Chairperson also noted that there had already been substantial input, during previous meetings, from the ANC, IFP and DA on the Committee’s draft report.

The Chairperson asked Members to consider how the Committee’s Report (the Report) should deal with the lack of response from Eskom, who, despite having been contacted regularly to engage with the IPAP2, had failed to do so.

Mr B Radebe (ANC) responded that Eskom had failed the Committee but that this should not delay adoption of the Report. He suggested that Eskom’s failure to respond should be reflected in the report and any future response from Eskom should be included in the annexure.

Mr X Mabaso (ANC) felt that there was no need for an annexure detailing Eskom’s response, as enough effort had already been made to communicate with Eskom.

Mr S Marais (DA) agreed with Mr Mabaso, and said that only submissions received to date should be reflected in the Report.

The Chairperson said that Eskom’s behavior was no longer acceptable. She felt that any future response should be included in the annexure, but it should also be noted in the body of the report that Eskom had not responded to the IPAP2. The public should be aware of the situation.

Mr Radebe said that Eskom’s role could not be ignored in the IPAP2 report. Including Eskom in the annexure would reflect upon them as an indictment.

Mr Mabaso then noted that Section 4, entitled ‘Key Issues Raised in Submissions’, did not include the issue of income inequity, and he thought it should be included.

Ms F Hajaig (ANC) said that the issue of inequity should be added to Section 4.1.1. of the report that dealt with the ‘Structural Imbalance of the Economy’

Mr Mabaso responded that inequity should be mentioned in Section 4 and expanded upon in Section 4.1.1.

The Chairperson asked Mr Mabaso to come up with a phrase to be included in Section 4 that would summarise the issue of inequity.

Mr Mabaso responded that the phrase “Equity Challenges” should be added to Section 4.

Mr S Njikelana (ANC) interrogated the ‘Export-Driven Objectives’ as a key issue that was mentioned in Section 4. He asked how it related to the thrust of key issues and the IPAP2.

Mr Marais responded that the ‘Export-Driven Objectives’ line included in Section 4 reflected a general drive to export products.

Mr Radebe expanded by saying that this line reflected the necessity for the South African economy to be self-supported and to have an export surplus.

Ms Hajaig said that it was important to find a balance between producing for the export market and providing manufactured goods for the domestic market. In this regard, she suggested that the line saying that local products must compete against imports, in Section 4.1, should be deleted.

Mr Radebe said that the ‘Export-Driven Objectives’ line should be rather be replaced by one dealing with ‘Manufacturing for the Domestic and Export Markets”.

The Chairperson said that emphasis must be given to the value-added effect. She said that it was about time that South Africa added value to its products before exportation, as did the European Union. South Africa should not do so aggressively but should rather grow the domestic market.

Mr Marais said that making specific mention of value-added products was a potential concern, as it excluded certain South African industries that were successful, despite the fact that they did not produce value-added products.

The Chairperson asked what was meant by regional integration in that part of Section 4 dealing with ‘Global and Regional Integration and Competitiveness’.

Mr Radebe responded that regional integration was included, as South Africa did not have certain resources in the country, but these could be sourced from neighbouring countries.

Ms Hajaig suggested that the phrase ‘Global and Regional Integration’ should be replaced by ‘Regional Integration and Global Competitiveness.’

Mr Marais said that it was important to add that sufficient funds would be required to support the IPAP2 within budgetary constraints. This could be included in Section 4.1, where it dealt with ‘IPAP2 and Employment Creation’

Ms Hajaig said that Section 4.1 should also include the concept of training and skills. She said that the relevant line should read, ‘Comprehensive Skills Training and Skills Transfer.’

The Chairperson said that Section 4.2, where the “The Exchange Rate Channel’ was included, should be worded in such a way that it could be easily understood by everybody, not just by economists. She said that notes should be included to expand on what was illustrated in the box. She said that point also was relevant in relation to Figure 2 in Section 4.2. She reiterated that the Committee’s Report must be accessible to everyone.

Mr Mabaso said that the reference to “fleet type” in Section 4.3, ‘Leveraging Public Procurement’,  should be defined in a footnote.

The Chairperson said that this point once again demonstrated the necessity for the report to be accessible to all people. She asked what was meant by “moral anti-corruption challenges” as mentioned in Section 4.3.

Mr Marais responded that “moral anti-corruption challenges” was merely a reflection of what Professor Roberts had said, and this quotation was referring to his submission that South Africa should move away from those industries that were associated with corruption.

Mr A Alberts (FF+) said that use of the word “moral” in the line was not necessary.

The Chairperson agreed with Mr Alberts and said that the line was tautologous. If this was a direct quotation, it should be put into inverted commas.

Mr Radebe referred to submissions made by Dr M Oriani-Ambrosini (IFP) in relation to Section 4.3, and said that these appeared to be in contradiction to the values of the IPAP2.

Ms Hajaig agreed and said that the issue of leveraging procurement and that of industry incubation were two separate issues.

The Chairperson said that Dr Oriani-Ambrosini’s suggested additions included the need to subsidise. This had not been the idea behind the IPAP2 and could contradict World Trade Organisation (WTO) rules.

Ms Hajaig felt that the addition regarding subsidies could certainly be misconstrued.

Mr Marais said that the additions were reflected in the wrong place. He suggested that if the Committee found that the suggestions could more appropriately be included elsewhere, then they should be included in that particular section.

Mr Njikelana said that Eskom was already open to international tenders. This meant that inclusion of this provision in the IPAP2 report was not necessary.

Mr Marais said that the paragraph of additions, in Section 4.3, should be removed, as it only included subjective explanations from one member.

The Chairperson referred to the concluding paragraph of Section 4.3, and said that the report should read either “import substitution” or “industrial development” not “import substitution/industrial development”.

Mr Marais responded that the report could include both, as the IPAP2 was about industrial development and possible import substitution.

The Chairperson made reference to the ‘Industrial Financing’ part of Section 4.4, and asked what was meant by the reference to “essential private sector investment”. She asked if it was being implied in the Report that without such investment the IPAP2 would fail.

Mr Marais responded that the word “essential” could be altered, but the importance of private sector investment should not be lost.

Mr Radebe suggested that the word “critical” replace the word “essential”.

Ms Hajaig felt that the word “necessary” should be used. She also said that all references to the WTO and International Monetary Fund (IMF) should be removed from Section 4.4 of the Report.

Mr N Gcwabaza (ANC) said that all mention of the WTO and IMF should be avoided. However, the Report must retain the point that internal sources of the IPAP2 funding should be sought.

The Chairperson said that definitions should be included in the footnotes for the terms “divestiture orders” and “conscious parallel conduct”, for the part of Section 4.6 dealing with ‘Competition Policy’.

Mr Marais noted that Dr Oriani-Ambrosini’s suggested inclusion, in Section 4.7, of points in relation to subsidies and tariffs, under the Development Trade Policy portion of the Report, was absolutely contrary to WTO rules.

Mr Radebe agreed that the suggested additions ran contrary to the IPAP2 and should be left out of the Committee’s Report.

Ms Hajaig said that this issue had already been addressed. The Committee could not put in print that this was against the WTO rules.

The Chairperson said that there was a point to be made about support for infant and new industries in ‘Development Trade Policy’, under Section 4.7. She felt that the wording of the Report should refer to “support” rather than “protect”.

Mr Mabaso said that the Report should include that decreased timeframes for tariff reforms should be considered with Broad-Based Black Economic Empowerment (BBBEE) principles in mind.

The Chairperson said that BBBEE considerations were included elsewhere in the Report.

The Chairperson said that it was important to include the Committee’s opinion on the ArcelorMittal-Kumba Iron Ore Resources contestation in Section 5.1, dealing with ‘Metal Fabrication, Capital and Transport Equipment’.

The Chairperson asked if Members were happy with the wording dealing within ‘Agro-Processing’, in Section 5.3, and whether, in particular, the reference to “re-settlement into rural areas” was considered appropriate, as it implied the use of force.

Mr Marais responded that the idea reflected the need to re-popularise rural areas. If a more appropriate word existed, then it should be used.

Mr Radebe alluded to another issue evident in additions made by Dr Oriani-Ambrosini, in Section 5.3, and said that there would be a problem in saying that larger agricultural producers should subsume smaller producers.

Mr Marais agreed, saying that there had not been, and should not be, any government prescription for this to take place.

Ms Hajaig said that there was no need to compare the labour intensity of the National Association of Automotive Component and Allied Manufacturers (NAACAM) members with those of assemblers, as presently included in Section 5.4, dealing with ‘Automotives, Components and Medium and heavy Vehicles’.

Mr Njikelana said that the additional paragraph placed into Section 5.6, on carbon emission, was not properly placed under the ‘Bio-fuels Industry’ and would cause too much controversy if it was included.

The Chairperson agreed that this addition should not be included in the Report.

Mr Radebe said that it should be stated explicitly in Section 5.6 that maize would be excluded as a crop considered for bio-fuel.

Mr Marais responded that the report should say that maize would only be considered once all food security issues had been covered. If a surplus existed, and food security was not a concern, then maize could be used for bio-fuel under certain conditions. This would not discourage farmers from farming maize in lieu of other products.

Mr Radebe said that using maize as bio-fuel would increase the demand and price of the crop, which would affect food security. Cabinet had already agreed to not use maize for bio-fuel.

The Chairperson said that the Report should emphasise food security as first priority. However, it should be stated that in a case of overproduction, then the food concerns of Africa as a whole should be taken into consideration.

Mr Marais said that the Report should clearly say that all food security concerns should be addressed before the bio-fuel industry considered using maize. He pointed out that if the use of maize was prohibited, then this could also prohibit the use of future varietals.

The Chairperson suggested that the report focus on certain agricultural products that were used for the bio-fuel industry, such as sugar-cane and canola.

Mr Marais cautioned against the Committee deciding what agricultural products should be used for bio-fuel.

Mr Radebe agreed and said that the Report should not mention any specific crop. Once the study requested from the Department of Trade and Industry (dti) on the viability of certain crops for bio-fuel had been conducted, then further decisions could be taken.

The Chairperson referred to the Conclusion in Section 6, and said that a distinction was needed between incentives and benefits with regard to private sector procurement.

Mr Marais responded that incentives implied some monetary gain, whilst benefits alluded to less tangible accruals. The intention was that the private sector should be incentivised to procure domestically.

Ms Hajaig suggested that the Report should say that private sector procurement should be optimised. The role of incentives and benefits should be included in Section 6, but it was not necessary to include the details of how these would be implemented.

The Chairperson asked whether the additions to the ‘Committee’s Comments’ in Section 6, regarding biotechnology, were appropriate.

Mr Marais said that the ideas in the additions were interesting, but were not supported by submissions received during the public hearing process.

Mr Njikelana agreed that these ideas were new, and complicated the Report. These ideas had not been reflected in the IPAP2. He did not think they should be included.

The Chairperson asked if a report on the role of local government in the IPAP2, as requested in ‘Recommendations’ in Section 8, would be necessary.

Mr Marais responded that the role of local government was imperative to the success of the IPAP2, as practical support for Executive decisions was necessary. A report from the dti on local government’s role was thus an important addition to the Report.

Mr Radebe agreed, saying that dti should supply a report detailing the role of all three spheres of government in the IPAP2.

Ms Hajaig said that the Report should include, in Section 8, a suggestion that the role of State-Owned Enterprises (SOE) must be investigated and defined.

The Chairperson said that the idea was to include very few recommendations. All the reports, whatever their regularity, which the Committee wanted dti to provide should be included in one recommendation.

The Chairperson said that after the submissions, the Report should set out the overall conclusion that there was a lot of common ground in the submissions, which also showed a distinct convergence between private sector goals and government aims. The three main areas of convergence were acknowledgement that re-industrialisation was crucial to the South African economy, a concern about the capacity / enthusiasm disparity, and an appreciation of the constraints evident in the transport and logistical areas.

Mr Marais added that everybody who submitted comments was aware of the necessity to create decent jobs.

Ms Hajaig added that it was important to say that the IPAP2 was meant to promote economic growth.

The Chairperson thanked Members for their comments. The final draft of the Report would now be prepared, in preparation for adoption on Tuesday 1 June.

The meeting was adjourned.


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